Queue or lounge: strategic design for strategic customer

Considering an M/M/1 queue with an additional lounge facility (LF), the quest of this paper is to understand the instances when LF is an attractive option, from customer perspective as well as from system perspective: will the customers choose to join the queue or prefer to detour briefly to lounge? In reality, customers do not perform complex computations for such tasks, but instead choose based on some heuristics. We further assume that the customers pessimistically anticipate the future congestion while making the choice. Our analysis reveals that the customers use the LF only when the queue is too crowded, and the lounge is relatively empty; however, strikingly, the customer choice is more inclined towards rejection for the LF in systems with higher traffic (load). We also explore an optimization problem where the system determines whether to implement an LF and what capacity it should have, while accounting for customers' behavioral responses. Under low load conditions, the system benefits from designing a high-capacity lounge, and the customers also prefer to use the LF actively. Surprisingly, neither the system prefers big LF, nor the customers prefer to use the LF profusely at high load conditions; optimal for either is to use the LF sparingly. Thus, importantly, the strategic system and the bounded-rational customers are not in a tug-of-war situation.